There are or have been instances where your loan portfolio has been criticized mildly or severely by bank or credit union regulators and all your efforts in turning around quality of the loan portfolio seem to be futile. This can be frustrating especially if you spent a lot of money on hiring ‘experienced’ staff and retraining them. If you are at this stage, and you don’t want to be fired or have your institution shut doors, what you need to bear in mind is that there is still a way out of the predicament. You can still cleanup your loan portfolio and lay the foundation for better quality loans. One thing that you can do is to get the services of a professional loan underwriting and review services provider. The services of the professional will come at a fee, but the fee that you will pay will be nothing compared to the overall benefits that you will reap. But before you dive into hiring a professional, conduct some initial assessment of the professional first. Here are some of the things you ought to consider, on how you can find the best loan underwriting professional for your needs.
- The background and the quality of the past work of the professional loan underwriter.
- The commitment of the professional in following internal loan policies, the examiner’s guidelines and industry practices.
- The breath of industry research data maintained by the professional loan underwriter.
- The length and appropriateness of experience of the firm in the banking industry.
- The loan underwriting techniques and discipline used by the professional.
- The benefits that you will get from a professional as opposed to an in-house credit or loan officer
Some of the benefits that come with the service are as follows:
- Good preparedness for examiners, thus avoiding criticism
- Early problem recognition and opportunity for remedial action, thus avoiding revenue losses.
- Excellent foundation for prudent loan underwriting
- High return on low investment
When regulators review individual loans, they evaluate People, Purpose, Protection, Payment, Problem and Prospects. Accordingly, a competent professional loan reviewer should do the same by assessing individual loans, including repayment risks, analyzing financial statements for risk and debt service capacity, evaluating risk grades and their accuracy, reviewing collateral/security perfection and calculating Loan to Value ratios, analyzing guarantors’ credit history and Personal Financial Statements, comparing actual financial performance with projections, identifying lapses in documentation, reviewing compliance with lending procedures and policies and recommending practices and procedures to address findings.